Although more full 100% bonds are being granted by the banks, most home loan applicants are still required to come up with at least a 5% to 10% deposit on any house purchase.
A 10% home loan deposit on an average property in South Africa is going to amount to between R60 000 and R80 000.
It could easily take years to save up 10% of any property price, and this is one reason why many new home buyers are exploring the option of using a Personal Loan as a deposit on their home loans.
Using A Personal Loan As A Deposit Is Not Always The Smart Option
Taking a personal loan to help secure the property finance you need to buy a house is not always advisable, but it can be a great convenience and it can help you get your foot into the property market.
The personal loan should only be considered if you have enough disposable income to safely cover the monthly payment. Remember, you will also be paying a large Home Loan repayment for the next 20 – 30 years.
Personal loans are usually offered up to a maximum of R100 000 and are payable over a much short term. These short term loans are unsecured and therefor are charged that very high interest rates.
Why These Personal Loans Are Popular
One of the reasons why these loans are popular among first time buyers is because they are very likely to gradually increase their income each year – making the monthly debt repayments much easier as time goes on.
Another reason is because, banks are surprisingly more willing to offer unsecured personal loans over a shorter 5 year term, verses granting a large home loan over a much longer 20 or 30 year term.
But, the excitement and strong desire to own your own property will likely play a very important role when considering if you are able to wait and save a cash deposit or take the extra personal loan.
Take the time to consider all your options and speak to your broker before deciding, this is going to be one of your biggest financial decisions.
An alternative option might be to look at a Rent To Buy Property that will enable you to rent the house to love, while you save up the deposit you’ll need for the bond.